By Shiyin Chen June 16 (Bloomberg) -- Stocks fell for a second day, the cost of insuring Asian debt rose to the highest in more than six months and the euro dropped to three-week lows versus the dollar and yen amid concern the European debt crisis is worsening. The MSCI All-Country World Index sank 1 percent as of 4:06 p.m. in Tokyo, extending yesterday’s 1.5 percent slump. Futures on the Standard & Poor’s 500 Index were little changed. The euro weakened 0.4 percent to $1.4117 and slid 0.8 percent to 113.89 yen. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan climbed 2.5 basis points. Oil rebounded from a four-month low. Copper and tin retreated for a second day. Greek Prime Minister George Papandreou was set to shuffle his Cabinet and seek to win a confidence vote today as protests over budget cuts fueled speculation that the austerity measures needed to qualify for international aid will be put in jeopardy. Equities and the euro extended losses after Het Financieele Dagblad cited European Central Bank Governing Council member Nout Wellink as saying the emergency fund for euro-zone countries should be doubled. “The bottom line is a default or restructuring on the part of Greece is going to end up being the Lehman event for Europe and the question is whether policy makers push this to the brink,” Scott Minerd, New York-based chief investment officer at Guggenheim Partners LLC, said in a Bloomberg Television interview, referring to the crisis that followed the collapse of Lehman Brothers Holdings Inc. in 2008. “If they keep kicking the can down the road, we’re going to face a disaster.” The Stoxx Europe 600 Index decreased 0.6 percent, while the MSCI Asia Pacific Index tumbled 2 percent, with more than seven shares retreating for every one that gained. The Asian gauge was on course for its lowest close since March 18. Exporters and raw-material producers led declines in Asia today, with Canon Inc. losing 1.8 percent and BHP Billiton Ltd. falling 2 percent. Asian Stocks Slump Japan’s Nikkei 225 Stock Average sank 1.7 percent, South Korea’s Kospi Index slumped 1.9 percent and Australia’s S&P/ASX 200 Index declined 1.9 percent. Lotte Shopping Co. dropped 7.2 percent amid plans by the South Korean department-store owner to sell convertible bonds. The euro touched reaching an all-time low of 1.1996 Swiss francs before trading at 1.2042. Greek police fired tear gas at 20,000 people who encircled Parliament House yesterday to protest Papandreou’s additional wage cuts and tax increases. German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet tomorrow in Berlin, with pressure increasing for the leaders to reach an accord on a rescue package for Greece. European Union finance ministers agreed on June 14 to convene again on June 19 after they failed to reconcile a German-led push for bondholders to shoulder part of the cost of a new plan for Greek aid. Sharing Losses The euro also declined yesterday after Irish Finance Minister Michael Noonan said senior bondholders should share in the losses of Anglo Irish Bank Corp. and Irish Nationwide Building Society, reversing a policy of protecting owners of senior securities. The New Zealand dollar weakened 0.4 percent to 80.34 U.S. cents after Finance Minister Bill English said the local currency’s strength was hurting the economy. The South Korean won dropped 0.6 percent to 1,089.73 per dollar. The Markit iTraxx index for Asia excluding Japan rose to 117.5, according to Royal Bank of Scotland Group Plc prices. The measure is set for its highest level since Nov. 30, according to data from CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers. The Markit iTraxx Australia index climbed four basis points to 118.5, Australia & New Zealand Banking Group Ltd. prices show. That’s on course for its highest level since Sept. 28, CMA prices show. Credit Markets “The Greek domestic political situation looks like it’s falling apart, while the Irish finance minister’s intention to impose losses on Anglo-Irish senior bondholders is a game- changer for the European situation,” said Finbar Cooke, Sydney- based head of credit derivatives at Australia & New Zealand Banking Group Ltd. “The credit markets have a lot to worry about at the moment and that means wider spreads in the near term.” Japanese bonds rose for the first time in four days, with the yield on the 1.2 percent bond due 2021 falling four basis points to 1.12 percent. Ten-year Treasury yields dropped two basis points to 2.95 percent, extending yesterday’s 13 basis points slump, the most since March 16. The Federal Reserve is scheduled to buy as much as $5 billion in U.S. debt today as part of its plan to scoop up $600 billion of debt. U.S. Economy Economic reports yesterday showed the Federal Reserve Bank of New York’s manufacturing index dropped to the lowest level since November, homebuilder confidence trailed estimates and consumer prices climbed. The S&P 500 dropped 1.7 percent yesterday to close at the lowest level since March 16. Crude climbed 0.4 percent to $95.19 a barrel on the New York Mercantile Exchange, following a 4.6 percent slump yesterday that sent prices to the lowest settlement since Feb. 22. An Energy Department report showed U.S. fuel demand fell for the first time in five weeks. Copper lost 0.9 percent to $9,070 a metric ton on the London Metal Exchange, extending yesterday’s 0.2 percent slid. Tin sank 1.4 percent to $24,800 a ton, while nickel lost 0.8 percent to $21,851 a ton. --With assistance from Susan Li in Hong Kong, Sarah McDonald in Sydney, Henry Sanderson in Beijing, Yoshiaki Nohara in Tokyo and Kristine Aquino, Ron Harui and Masaki Kondo in Singapore. Editors: Nick Gentle, James Regan To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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